Krugman’s Keynesian Christmas Carol

By: William_Anderson

It is the year 2014 and Tiny Tim is ill, but he does not need the generosity of Ebenezer Scrooge to bring him back to health. No, as Paul Krugman insists, the Cratchits

have health insurance. Not from their employer: Ebenezer Scrooge doesn’t do employee benefits. And just a few years earlier they wouldn’t have been able to buy insurance on their own because Tiny Tim has a pre-existing condition, and, anyway, the premiums would have been out of their reach.

But reform legislation enacted in 2010 banned insurance discrimination on the basis of medical history and also created a system of subsidies to help families pay for coverage. Even so, insurance doesn’t come cheap – but the Cratchits do have it, and they’re grateful. God bless us, everyone.

Now, Krugman admits that this is just a story, but he has seen the Ghost of Christmas Future and declares:

O.K., that was fiction, but there will be millions of real stories like that in the years to come. Imperfect as it is, the legislation that passed the Senate on Thursday and will probably, in a slightly modified version, soon become law will make America a much better country.

Indeed, we know that the legislation that will place more chains upon us than which bedeviled Jacob Marley is going to be costly, much more costly than Krugman will admit, and I am not about to say that imposing new costs and taking the individual out of medical care will make this a better country. In fact, I would not be surprised if it made the USA a place that people will want to leave, if only to find a place where they can receive adequate care.

Being a skeptic about this impending legislation places me in Krugman’s gunsights. You see, the only possible reason that I could oppose this attempt to impose "universal" medical care is that I want the Tiny Tims of the world to become sicker, and ultimately to die. Lest one think I exaggerate, here is Krugman in his own words:

First, there’s the crazy right, the tea party and death panel people – a lunatic fringe that is no longer a fringe but has moved into the heart of the Republican Party. In the past, there was a general understanding, a sort of implicit clause in the rules of American politics, that major parties would at least pretend to distance themselves from irrational extremists. But those rules are no longer operative. No, Virginia, at this point there is no sanity clause.

Actually, he is wrong, as many of the "tea party" and "death panel" folks are not Republicans, at least in the mainstream sense of the word. They are libertarians and supporters of Ron Paul and others like him, but since Krugman considers Paul and other adherents to Austrian Economics to be ignorant nuts and financial illiterates, they obviously are going to be targets of his scorn. Furthermore, the prospects of "death panels" are quite real; they exist in all of the other countries that have the kind of "universal care" that Krugman endorses.

Although Krugman claims that any "horror story" about medical care in places like Great Britain is nothing but lies, I will present a real-live horror story that tells volumes not only about socialist medical care, but also people like Paul Krugman, who believe that egalitarianism is the highest principle of all, even if it leads to someone unnecessarily dying a horrible death.

Debbie Hirst, a woman living in Great Britain, suffered from breast cancer, which had metastasized. As the New York Times explains, the British National Health Service refused to provide her with Avastin, a drug widely available in the USA and Europe, because the government declared it to be too costly. As the NYT explains:

…with her oncologist’s support, she decided last year to try to pay the $120,000 cost herself, while continuing with the rest of her publicly financed treatment.

By December, she had raised $20,000 and was preparing to sell her house to raise more. But then the government, which had tacitly allowed such arrangements before, put its foot down. Mrs. Hirst heard the news from her doctor.

"He looked at me and said: ‘I’m so sorry, Debbie. I’ve had my wrists slapped from the people upstairs, and I can no longer offer you that service,’ " Mrs. Hirst said in an interview.

"I said, ‘Where does that leave me?’ He said, ‘If you pay for Avastin, you’ll have to pay for everything’" – in other words, for all her cancer treatment, far more than she could afford.

Officials said that allowing Mrs. Hirst and others like her to pay for extra drugs to supplement government care would violate the philosophy of the health service by giving richer patients an unfair advantage over poorer ones.

Patients "cannot, in one episode of treatment, be treated on the N.H.S. and then allowed, as part of the same episode and the same treatment, to pay money for more drugs," the health secretary, Alan Johnson, told Parliament.

"That way lies the end of the founding principles of the N.H.S.," Mr. Johnson said.

Indeed, this is a most telling story, and according to the NYT, Hirst was not alone as many other people had similar tales. (Most likely, Krugman would accuse all of them of lying or, worse, wanting to upset those egalitarian principles that will make these sorry events inevitable.)

Keep in mind that the National Health Service in this case was acting as a "death panel." (Of course, "death panels" don’t exist under socialist care; Krugman tells us so.) However, because of the adverse publicity, the NHS backed down and paid for Hirst’s Avastin. Nonetheless, this episode gives us an important window in examining the institutional nature of socialist medicine.

As anyone who ever has dealt with a bureaucracy knows, the most important thing is that the people working in those bureaus protect themselves and the government. The real purpose of socialist medicine is not making sure that everyone who needs medical care can receive it.

Instead, the real purpose of such a medical regime is to ensure that all people receive the same care, even if that care is substandard. (There is an exception: people who are politically-connected will be jumped to the head of the line and will find that the finest health facilities are reserved for them. For example, when Michael Moore took Americans to Cuba so they could experience medical care under socialism, he took them not to the facilities that regular Cubans frequent. Instead, they went to the care facility that exists exclusively for political elites, something Moore failed to tell his audience.)

I wish that Krugman’s invective was limited to the "death panels" crowd, but he next turns on those who are concerned about the costs of this legislation:

A second strand of opposition comes from what I think of as the Bah Humbug caucus: fiscal scolds who routinely issue sententious warnings about rising debt. By rights, this caucus should find much to like in the Senate health bill, which the Congressional Budget Office says would reduce the deficit, and which – in the judgment of leading health economists – does far more to control costs than anyone has attempted in the past.

But, with few exceptions, the fiscal scolds have had nothing good to say about the bill. And in the process they have revealed that their alleged concern about deficits is, well, humbug. As Slate’s Daniel Gross says, what really motivates them is "the haunting fear that someone, somewhere, is receiving social insurance."

How do we know that this bill will "reduce the deficit"? Why, the bill declares it to be so, and the accounting methods contained in this bill "prove" it. Now, according to Mark Hemingway, there are some accounting tricks in this legislation, and I suspect that if private firms used the same accounting methods, some people would be hauled off to prison, and Krugman would lead the cheerleading squad for the prosecution.

For example, according to Hemingway:

In order to make health care legislation sound cheaper than it is, the Senate health care bill begins collecting major tax increases and fees immediately and delays the bill's major spending provision for four years. So cost projections bandied about in media reports are taken from 2009 to 2019 and appear substantially cheaper than when the legislation's spending is in full effect from 2014 to 2024.

Even this dishonesty is built upon the assumption that the projected revenues of these massive tax increases will match the actual revenues, something that is highly doubtful in the current economic climate. One might recall that Jeffrey Skilling went to prison in part because Enron aggressively counted all accounts payable as present income, as opposed to Enron’s counting the income when the money actually came in. (This was legal, but the government still found a way to criminalize it.)

Furthermore, Krugman commits the logical fallacy of "appeal to authority" in his declaration that since the "leading health economists" have approved this bill and its fiscal language, then there is nothing left to argue. Thus, Krugman reasons, those critics who are concerned about the costs of the bill really are saying this because they want others to get sick and die.

As for "controlling costs," Krugman demonstrates once again that he is not an economist. No government can successfully mandate "lower costs." Governments can place price controls and do like the British NHS and deny certain care, which means that individuals suffer and die prematurely. Such actions might show up on official balance sheets as "lower costs," but economically speaking, that is fiction.

Whenever governments attempt to impose "cost controls," they create other dislocations that are costly to people who cannot obtain certain goods precisely because of the "cost control" mechanisms. When people must suffer because government authorities have denied medical care, that is a cost borne by the individuals and their families. When people die prematurely, that is a cost that is borne by others, and it is every bit as real a cost as anything that appears on a government spreadsheet.

Given the record of government medical care, it is easy to envision a completely different outcome to the Tiny Tim Cratchit affair. Instead of assuring that Tiny Tim receives the medical treatment he needs to survive, the government health authorities declare that it is too costly to treat the lad and suggest that he take lots of painkillers (which the government provides for free) that will keep him out of pain until he dies (and, thus, stops costing the government so much money).

Outraged at this situation, Ebenezer Scrooge declares that he gladly will pay for all of Tiny Tim’s treatment, only to be rebuffed by the government, which declares that paying for Tim’s care will undercut the very basis of the government’s health policies. The government announces that because Scrooge does not have enough money to pay for everyone’s medical care, then he cannot be permitted to pay for anyone’s care, including care for himself.

When this situation becomes public, Krugman declares that it only is a "scare story" and is patently untrue. And, if it is true, Krugman continues, it is a necessary event, since one "must break some eggs to make an omelet."

God bless us everyone, for when this bill becomes law, we will need to invoke God’s blessing if only to stay healthy.

William L. Anderson, Ph.D. [send him mail], teaches economics at Frostburg State University in Maryland, and is an adjunct scholar of the Ludwig von Mises Institute. He also is a consultant with American Economic Services. Visit his blog.

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